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What to Do if Your Loan Modification Was Denied


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TERMINOLOGY

If your mortgage loan modification request was turned down by your lender, you can still avoid losing your home by fixing whatever problems caused the denial. Sometimes the problem may be as simple as providing correct information to your lender. If you were denied for credit-related issues, this may take some time to repair, but you should be able to prevent a foreclosure if you are willing to do what is necessary to get your loan modification approved.

Reasons Your Modification Was Denied

When your modification is turned down, you will receive a denial of credit letter in the mail from your lender. This letter will explain why your loan request was denied. Here are some possible reasons:

  • delinquent credit
  • insufficient income
  • loan-to-value ratio
  • missing information

Once you know the reasons your modification request was denied, you can begin to fix the problem so you can receive an approval.

Fix the Problem

If your loan modification was denied for any of the above reasons, try to decide the best way to cure the problem. If you start to fix what the lender needs in order to be able to grant your request, they will see you have the desire to do whatever is necessary to get your request approved. Here are some ways to fix the above issues:

  • Arrange to repay your late credit, even if the amount you pay is smaller than the original payment.
  • Reduce your expenses, downgrade to a cheaper car, or get a part-time job to increase your income.
  • Borrow from family if possible and pay down the loan to reduce the loan-to-value ratio.
  • Gather the missing information and re-apply for the modification.

If your modification was denied for one of the above reasons, fixing the problem may require you to rearrange your lifestyle. This is a necessary sacrifice if you want to save your home.

Re-Apply for the Modification

Once you have taken steps to remove all of the reasons your lender denied your modification, before you reapply, call them and arrange a time to meet at their office. When you are face to face with the lender, first tell them what you did to fix the problems they had with your request. Be specific and do not be afraid to play to the lender’s representative's emotions. If you had to sacrifice going to your child’s ballgames because you took on a part-time job, let him or her know you did so because of your desire to save your home.

You can also ask if your lender has another type of modification they would approve you for--for example, a slightly higher payment than you had proposed. If they are still hesitant to approve your request, ask them if having a cosigner would allow them to approve the loan.

If the lender simply cannot grant your request, find out exactly what they need to approve your loan and take whatever steps are necessary to meet these requirements in order to save your home.